Apr 30, 2019

How Come Uber and Lyft Have Stopped Hiring New Drivers in New York City?

New regulations intended to assure drivers earn the equivalent of the minimumwage - and reduce the number of passenger-less cars on the streets are affecting the companies, causing them to focus on the drivers they already have. JL

Dana Rubinstein reports in Politico:

The move suggests New York City’s new driver pay regulations are having their desired effect by restricting the driver
pool, limiting an
over-saturated market. (And) a one-year moratorium on new for-hire vehicles (means) both
companies are limiting how many cars and drivers, that should be good for traffic." Regulations ensure drivers for Uber and Lyft earn at
least $17.22 an hour after expenses. The rules penalize companies for
running cars without passengers. The higher a utilization rate, the less it has to pay drivers to meet the wage requirement. Since the rules went into effect, drivers earned $56 million more than they would have. Uber’s and Lyft’s once inexorable-seeming growth in New York City has ground to a halt.
Uber stopped hiring new drivers in New York City on April 1. Lyft followed suit on April 19.

In a little-noticed posting on its website, Uber attributed its new policy “in part to new TLC regulations.” A knowledgeable source said “regulations” refers to the city’s new wage rules. Lyft told POLITICO much the same.
The move suggests New York City’s new driver pay regulations are having some of their desired effect, by restricting the growth of the driver pool and limiting what many driver advocates characterize as an over-saturated market.
The wage regulations that went into effect Feb. 1 use a novel approach to ensure drivers for companies like Uber and Lyft earn at least $17.22 an hour after expenses. The rules penalize companies for running too many cars without passengers on city streets. The higher a company's utilization rate, the less it has to pay drivers to meet the new wage floor requirement.
That "means they have to keep current drivers busy, so it may be an indication they are unable to keep current drivers as busy as they need to," said former city taxi commissioner Meera Joshi, who helped develop the new rules.
Since the rules went into effect, drivers have earned $56 million more than they would have otherwise, according to a city presentation from earlier this month.
Transportation industry expert Bruce Schaller suspects that the Uber and Lyft decision to halt the growth of their driver workforce is due to two developments: first, the aforementioned wage floor, and second, the city’s one-year moratorium on new for-hire vehicles, which went into effect last summer and expires this August.
“Both companies are now moving toward limiting how many cars and drivers are on the street,” said Bruce Schaller, a transportation policy expert. “That should be good for traffic. And the [city] wage rule should mean it's good for drivers."
Bhairavi Desai, who advocates for drivers at the New York Taxi Workers Alliance, came to a similar conclusion, though she attributes the halt in new drivers to other factors, too — namely, Lyft’s IPO and Uber’s upcoming public offering. Desai also cited the companies' self-interest in touting the effects of the wage rule so as to forestall the renewal of the vehicle moratorium, which she says they consider more onerous.
“[Analysts] have all said they need to cut back on the number of drivers, so doing so now satisfies that directive while setting them up to fight a regulation which they find more restrictive,” she said.
When asked for comment, both Uber and Lyft made clear that once their driver supply dips too low, they will begin accepting new driver applications again.
“We do have a waitlist and will let drivers know when they can apply to drive,” said Lyft spokesperson Campbell Matthews.
“As drivers exit the industry and demand from riders increases, we will once again seek to add new drivers," said Uber spokesperson Josh Gold.
In a statement of its own, the city’s Taxi and Limousine Commission sought to make clear that the "driver sign-up limit was a decision taken solely by Uber and Lyft” and does not extend to the rest of the industry.

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As a Partner and Co-Founder of Predictiv and PredictivAsia, Jon specializes in management performance and organizational effectiveness for both domestic and international clients. He is an editor and author whose works include Invisible Advantage: How Intangilbles are Driving Business Performance.Learn more...